OBLIGATIONS AND CONTRACTS | Feb.

22, 2018 Review

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FIRST DAY REVIEW | 3RD EXAM rights of the third persons recognized by law so that is ---
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So how is Contract define?
So take note the provisions of the Obligations and
Article 1305. A contract is a meeting of minds
Contracts are merely suppletory. The law will be the
between two persons whereby one binds himself with
stipulations between the parties and the reason why we
respect to the other, to give something or to render
have the first characteristic of obligatory force of contracts
some service
We have the mutuality of contracts as defined by Article
What are the stages of the Contract? (PPC)
1308 that its compliance or validity cannot be left to one
1.) Preparation of the will of the contractor as within as within ----
2.) Perfection supplying their will
3.) Consummation
Going back to Golangco, the stipulation between

Characteristics of a Contract? (OMR) Golangco and the bank whereby it only liable for its
defects within 1 year is binding because that is the
There are only three ha agreement entered by the parties but is that true in the
case of Castro?
1.) Obligatory force of Contracts
2.) Mutuality of Contracts Was that true in the case that stipulation or agreement
3.) Relativity of Contracts between the Tan and the debtor?

There are not in De Leon because they De Leon is not Answer by the class: No maam
cited by the Supreme Court
Mallari vs Prudential Bank – Was it the law?
And what are the Elements of a Contract (ENA)
Class: Yes
1.) Essential Elements
2.) Natural Elements Maam: yes because of that 24% interest is the prevailing

3.) Accidental Elements rate of interest at the time the contract was conferred into

Which of the attendance is required to be present in the Heirs of Ek Liong that the okay

contract?
Mutuality of Contracts

Essential Elements
PNB, Floirendo , Juico where the stipulations in those

And Article 1306 of autonomy of contracts in relation to cases contrary to Article 1308 leaving the creditor the

obligatory force of contracts, there are stipulations, unbridled right to independently acquire acquiesce a right

clauses, terms and conditions agreed upon by the parties of interest without mutual consent of the other party. It
shall be the law between the contracting parties and shall destroys that mutuality of contract because it is the very

be complied with provided they are not contrary to law, important modification that will require the consent of the

morals, public order, public policy and prejudicial to the other contracting party

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But not true in the case of Allied Banking that phrase "for
a like term" for an option of the lessee because this is
construation that may be given or not by the lessor . He is
free to give or not to give that option and moreover that
phrase of Life term "for a like term" refers only to the
period of the leased which is good for 30 years so and
also the Court held that the bank also may or may not
exercise option to renew so those are free actually
PNB vs Manalo, In Jonsay, NO? --- returned to the
debtors the excess of the foreclosure sale or proceeds of
the foreclosure sale then what is to be left in determination
to a third persons? That must be either to be binding
(class : inaudible) (side note basta 1309) unless? (class:
inaudible)
There is a difference in inequitable and iniquitous ha dili
pata magbisaya : Inequitous kay bisaya but inequitable is
partly tagalog, partly bisaya okay
(Maam joke about Florentino vs Supervalue)
So the general rule is that contracts are take effect only
between the parties, heirs and assigns, Exceptions: if it
is their very nature, stipulations is what? Is not
transmissible so the heirs cannot bound by the contract
under any of the circumstances mention
Another exception where third persons are allowed to
interfere in the contract , the last sentence or the last part
of the of Article 1311
(maam told the class about not following instruction and
the parts of third exam)
Okay let’s go to the second, the second is the exception
in the Article 1311, wherein, even the third persons are
allowed to interfere in the contract. But take note not all
stipulations in favor of a third person are stipulations pour
autrui. For stipulations pour autrui to be present, there are
OBLIGATIONS AND CONTRACTS | Feb. 22, 2018 Review
seven requisites that must be complied with, and this was
perfectly illustrated in the case of Baluyot vs Court of
Appeals. This involve the parcel of land occupied by
settlers in Brgy. Cruz – na – Ligas in the University of the
Philippines where UP donated that to the Quezon City
government, so that the Quezon City government will
donate the lot to the occupants. In one of the reasons
given by UP that there was no perfected contract because
there was absence of acceptance on the part of the
occupants. This was belied by the Supreme Court when
it said that the occupants demanded for the release of the
title so that the subdivision pursue.
And of course, Integrated Packaging, can the Paper
Company be made liable for failure of the publishing
company to publish the PHILACOR books? No, because
absence of previty between the Paper Company and
PHILACOR.
Likewise, in the case of A and C Minimart. Can the true
owner demand for the delivery of the rentals and the
penalties agreed upon by the prior owner? Let’s see,
because this involve the issue on who is really the true
owner of the property that was lease by A and C Minimart.
And when the controversy in suit, A and C consigned. So
can the real owner demand for the delivery of what has
been consigned in the court including the penalties?
Now, the other exceptions are found in 1312. Contracts
creating real rights. Third persons who come into
possession thereof shall respect, subject to the
exceptions of Mortgage Law and Land Registration Laws.
The third is 1313, contracts intended to defraud creditors.
The creditors may interfere in the contract between the
debtor and the third person. And the coverage so much
that be sufficient to cover his credit.
In 1314, but in order for 1314 to apply, there are three
requisites. There must be (1) knowledge on the part of the
2

inducer that the induce had an existing contract with the
other party; (2) the existence of a valid contract, (3) the
interference without legal justifiable cause. Otherwise,
there can be no application of 1314, the liability of the
parties, however, the inducer and the induce is solidary.
They being joint feasors.
And 1315 on perfection of consensual contracts. How is it
perfected? Consensual contract is perfected by mere
consent. And from that moment on the parties are
memorize niyo yan. Because that will be
consequences in relation to that. But there are certain
contracts that aside from consent would be part delivery
for the perfection like decided by the Supreme Court in
the case of Garcia vs. Thio.
Supposed it was credited on the account of Mr. Samama,
can there be presumption that there was already
perfection? Si Mr. Samama ba. When there be
presumption that there is perfection? The bank would say
that the credit must account. (Ma’am G and Monteroyo
convo)
So what are an enforceable contracts? These are
contracts entered into by person without being authorized
or has exceeded the limits of authority granted to him.
Can these be ratified by prescription? No. But the
notification must come on the form of what? Express or
implied notification by the principal. But not through
prescription.
And how is consent manifested? The acceptance must
be? Because a qualified acceptance constitute a counter
offer. Is there a perfected contract in a qualified
acceptance? Wala ha! Bantay lang pag abot niyo sa
Sales. Kulatahon ta jud mo. Pag muingon si Atty. Saluna
Unsa na. bagsaka na na! wala na naminaw. In amplified?
Yes. Which? On the second. Why? Why? One word. It is
a counter – offer! The second is merely a counter – offer
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di ba? And would buy additional yan, that’s counter offer.
Because the first is fix and definite.
But what if the acceptance is through a telegram?
Perfection comes when? When he acceptance comes
into the knowledge of the offeror because Philippine Civil
Law adheres to the Cognition Theory. So perfection
comes only when the acceptance comes to the
knowledge of the offerer or through the agent. When is
there perfection communicated to the agent acceptance?
the As soon at it has been communicated. Employee of the
principal? As soon as the principal has knowledge of the
acceptance.
Now, was there a perfected contract in Jadine Davis?
Wala jud nibasa oh. Wala jud nitingog ba. There was.
That December 12 letter of transfer to PUREFOODS.
That was already considered as acceptance, an
unqualified acceptance by FEMSCORP and isn’t it that
they were informed that they were the winning bidder.
FEMSCORP is the winning bidder and may it be true that
the letter contains certain conditions but these conditions
are … what? … When it refer to the performance but not
to the perfection of the contract. And moreover there was
compliance with the requirement of Purefoods to submit
this… anong submit? Wala nagbasa noh. Performance
bond and the insurance.
Soler V. CA, aw, can Jardine Davies be held liable for
interference? Wa namasa. Cannot! In the absence of
proof, while it may be true that Jardine Davies offered a
bit lower than that of the FEMSCORP but in the absence
of proof that it had interfered then it can’t be held liable for
damages.
Soler. Perfected? *answers YES* All the stages. When
was there negotiation? When Lopez offered the work to
Soler. When was there perfection? When Soler delivered
the blueprints of-. Can the bank be made liable because
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the bank said you could have authorized Lopez, yes
because to establish that the bank had used the plans in
the blueprint as evidenced by one of the offices of the
bank in Malate. It used the blueprints submitted by Soler.
And in the case of Province of Cebu V. Morales.
Perfected. This involves a parcel of land that was bought
by Morales from the Province of Cebu which was
subsequently donated by Province of Cebu to the City of
Cebu including the land that was bought by Morales. Yan
ang issue dyan.
Garcia V. Thio. There was perfection despite the fact that
it was a different person that was stated in the check, isn’t
it? Payable to the order of another person not to the
person who receive the check. The petition is that there
was only perfection because being a contract of loan it is
already perfected from the moment that it was delivered.
Pangan V. Perreras. *answers perfected* yes, with
respect to the share only of the widow, but not of the other
heirs because according to her she cannot sell the
property due to the absence of the consent of the other
heirs, but actually the Supreme Court said you don’t have
to obtained because what you are selling is your inchoate
share or intellectual share of the property.
Duarte V. Duran. Perfected noh.
Robern Development. Ito yung Monteritz, Davao City
case ito. Robern is the one who developed Monteritz.
People’s landless were the ones occupying, there was a
perfected contract despite the allegation of People’s
Landless that it was already accepted by the bank
manager here in Davao but it was also proven that there
is still a need of the approval coming from the Home Office
of the owner of the People’s Landless.
SMI. What was perfected? The first, the second or the 80
million? Hindi yun 140 million increase lang yun ng
OBLIGATIONS AND CONTRACTS | Feb. 22, 2018 Review
goodwill money. Because once they accepted the 80
million, isn’t it that SMI submitted the plans for the mall.
So in effect there was a writ perfection. Oh I remember,
wag niyo isulat kasi lumabas na ito. So si A inoffer niya
kay B yung property niya for 750,000, decide within five
days whether they are going to buy it or not, then on the
third day, B went to A already with the 700,000 accepting
the offer, option contract ito hindi? Option hindi? There
was already an offer, it is not an option. There was an
offer, akong ibaligya tagaan tika ug lima ka adlaw nga
mudisidir (?) disidir (hahaha) kung kwaon ba nimo or dili,
dili siya option ha. Option is different from this, this is a
offer actually, so sabi ni B bilhin ko ito yung 700,000
manager’s check (2nd exam) or cashier’s check. These
are actually equivalent to cash because if it is a manager’s
check there is already an infinite amount that is deposited
representing the amount written in the check. Pero sabi ni
A, ay sabi kasi ng kaibigan ko 750 daw dapat, sabi naman
ni B pwede pero bayad ako ng 700 yung 50 later na lang.
Follow? Okay. Then B found out that A sold the property
to C for 800. May B sue A for the annulment or rescission
of the contract? Past exam ko yan so di na yan lalabas,
but that’s a teaser. Can? Yes, because there is already
acceptance, the acceptance is absolute remember that it
was offered for 700,000 and it was accepted within that
period. You see? It’s not an option. It is an offer of to buy
and to sell which upon acceptance is reciprocally
demandable. Follow? So there was according to the
examiner, there was perfection. This is not considered
to be a counter offer. Sinabi nila pwede pero but it was
already perfected because this was the price agreed upon
by the parties. Bar question yan siya, tinanong ko din sa
exam pero hindi na yan lalabas.
Atty G: Yes Mr. Monteroyo?
Eman: ma’am if it were to be constructed in kanang
option contract –
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Atty. G: oh yun nga ang question ko eh. Kasi sabi ni A,
it was only, it was not an offer to buy and to sell, it was
an option contract.
Eman: but if it were-
Atty G: it’s not an option contract
Eman: yes ma’am, the statement is offered but if it were
to be constructed as an option contract
Atty G: and we will go later to Keppel because that is
how the Supreme Court had harmonized 1379 in
relation to Article 1374. Okay? Wait ka lang dong.
So, 1323 an offer becomes ineffective upon the death,
civil interdiction, insanity or insolvency of either party.
So, let’s got to option contract. Now, take note that option
contract is merely a preparatory contract where one party
gives the other party a certain fixed period under certain
terms and conditions to decide whether or not the power
to decide whether or not to enter into a permanent or
principal contract of sale.
So the option is different from the right of first refusal
which was mentioned in the case of Bentir v. Leanda.
The right to first refusal is different from an option contract
in the sense that the right to first refusal is normally
incorporated in the contract of lease whereby the lessor
gives the lessee the right to refuse as if he would decide
to sell the property whereas in an option contract both
parties there is an option granted whether or not, the
lessee will buy the property because if you have read the
decision of the court, the option is not one where the
parties are bound to sell or bound to buy—It’s the not, the
option is not an agreement where the parties are bound
to sell or bound to buy. It is merely an option.
Now, 1324, provides that the offeror may withdraw the
offer anytime by simply communicating the withdrawal
before acceptance unless the option is founded upon a
OBLIGATIONS AND CONTRACTS | Feb. 22, 2018 Review
consideration as something paid or promised. Okay, that
was—and there were separate decisions rendered by the
court whereby the court have held that if the an option is
not founded upon a consideration, even if there was an
acceptance by the offeree, the offeror can still withdraw
the offer. So come now the case of National Oil Company
v. Keppel Holdings whereby dispite the fact that there was
absence of consideration for the option but because
Keppel had already accepted or wanting to exercise the
option, then PNOC could no longer withdraw the offer. In
fact, if demanded several times the execution of the deed
of sale, so even if there is no consideration but in relation
to 1479, an accepted promise of to buy and to sell
becomes reciprocally demandable. So in short, if there
has already been acceptance then the offeror can no
longer withdraw the offer. And this was the decision of
Sanchez v. Trigos where the SC had reiterated in this
case of PNOC v. Keppel. So it is no longer the right of the
offeror to withdraw as soon as acceptance is conveyed by
the party who was given the right to option because it
becomes reciprocally demandable. Questions?
Estremos: So because of the PNOC case maam, is
Eugolio case already a stray case, maam?
Ma’am: There were decisions prior to that,
Southwestern Molasses, (another case), so in those
cases the court cannot arrive to one particular
jurisprudence that would be considered as Stare
decisis, so this (Keppel case) erased all those different
decisions of the court.
Estremos: Including Eulogio, maam?
Maam: Yes, so deemed abrogated sya unless there
would be subsequent decisions. So sufficed it to state,
there is no need for a consideration if there had been
acceptance and the offeror could no longer withdraw
the offer. Do you have other questions?
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Now Villamor v. CA is one where the allegation of the
lessor was there was no consideration of the option
however it was established that the price that was paid for
by the lessee was more than the current market value of
the time that the lease contract was entered into and that
was sufficient consideration for the option. However, this
was barred by prescription because it took the lessee
more than 17 years before she decided to exercise—by
the way, if the contract does not state the period within
which to exercise any right or privilege granted in a
contract, what will be your basis? You go to the provisions
on prescription, so if it based on a written contract—10,
oral—6. Ibutang na sa utok. Unsang grabe? Huy that are
principles that you should not forget, because your right
may be lost by prescription or by latches.
So once there is acceptance, remember it becomes a
bilateral promise of to buy and to sell that now becomes
reciprocally demandable. Precisely, in the case Keppel,
Keppel now filed an action for specific performance
because it becomes reciprocally demandable because
there has already been acceptance.
Who are those who cannot give consent, 1337? (Class
murmurs answer) And the deaf-mute must be unable to
read and write?
Now, what are the vices of consent? And, if any of those
vices would be exercised, what will be the nature of the
contract? Voidable. So when is there mistake as to
invalidate consent? What about fraud? When
misrepresentation of a 3rd person shall would be ground
for annulment of contract by reason of mistake? Ha?
Misrepresentation by a 3rd person? Mistake must be
substantial and must be mutual.
Okay, let’s go to—in Limson v. CA, by the way, there was
an option contract and the distinctions given by the court
respecting earnest money and option money. Always
OBLIGATIONS AND CONTRACTS | Feb. 22, 2018 Review
remember that, in the stipulation between the parties, the
rights and obligations arising from those shall be
governed by law and not by the parties, denomination and
the document. Precisely because, in this case while they
denominate the receipt as earnest money but a reading
of the receipt would should that it was an option money
and that gives rise to the distinction given by the Supreme
Court. When is it earnest money and when is it merely an
option money?
Okay, so we go now to 1332, where one of the parties to
a contract is unable to read or understand the language
in which the contract is written. The party enforcing the
contract must prove that he has fully explained the terms
of the contract. True or false? False.
Students: “He has fully explained”
Ma’am: Mali. A fault or a mistake must is alleged.
Ahhhhh. Hahaha.
Baban: Minus 2. Hahahah
That was why, was there fraud in the case of Fontana
Resort? Was there misrepresentation on the part of the
sales agent of the Fontana resort when it entice Mr. Tan
to buy shares? There was none, isn’t it? Because ano
yung ploy ng mga sales agent? Just like in 1340, trader’s
talk dealer’s talk, they always give the best sight of what
they are selling because if you buy it that’s your stupidity
that made you buy it. So in Fontana resort there is no
defect of the bid in the part of the buyer.
Dela Cruz V. Dela Cruz, likewise, there was no defect
because it was not established that Pacencia was unable
to read or understand the language of the contract that
was written and moreover how many times did Fortunato
mortgage the property? Wa nagbasa diay, wa may
naningog, Ikatulo (3) and these are all acts of ownership.
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You cannot just simply mortgaged a property without
being authorized or if you are not the owner thereof.
Feliciano V. Zaldivar, however, was different. The court
held that Remegia is unable to understand the language
in which the affidavit of confirmation of sale was written, it
being established that she has a limited educational
attainment and while there was this testimony of Judge
Velez, what was wrong with the testimony? What does the
testimony failed to established? Because according to, he
interpreted in the dialect so it is not the compliance with
the requirement in 1332 that this must be, the terms must
be fully explained to the parties unable to read and
understand.
intended to be bound by it provided that it is not contrary
to law, morals, etc. etc. Absolute simulation, the parties’
true intention do not intend to be bound by the agreement.
So was there simulation in the case of Villegas? There
was, isn’t it? It made it appear that there was this
agricultural loan where the land is planted with sugar cane
crops however, in case in fact, it was a residential lot. In
the parties being in pari delicto, do they have a course of
action against each other? They were in pari delicto, isn’t
it? Rural Bank is aware. So the court leave them as they
are, they cannot seek refuge.
Villaceran V. De Guzman. Relative Simulation Bakit?

Doms: *inaudible*
In Georg, there was no defect in the consent when Sister
Medalle affix her thumbmark in the MOA, she was aware Atty G: Who was the owner of the property?
that there was this MOA respecting, ano yung MOA?
Yung 4 million worth of tickets. *inaudible*

So, fraud. When is the fraud void under 1338? At the time In the case of Clemente V. CA. was their simulation?

of the constitution of the contract. Under 1171? Relative or absolute?

Performance or fulfillment. What are the requisites in

order that fraud should be grant to the annulment of the
contract under 1338? There are four:

1. It must be serious.
2. Employed by one party against the other
contracting party, not a co-party.
3. Deliberate intent (?)
4. It must have induced the other party to enter
into the contract.

And the fraud here is? Causal Fraud because incidental

fraud would only be liable for damages. And 1339 on
failure to disclose facts. 1340 on dealer’s talk, trader’s
talk.

Then we go to Simulation of Contracts. May be absolute

or relative. So there is relative simulation when the parties